I last wrote about London-focused flexible workspace provider Workspace Group (LSE: WKP) back in January, describing the Real Estate Investment Trust (REIT) as a top dividend and momentum stock worth investing in for 2018. Since then, the stock is up around 13%, which isn’t bad. But today’s full-year results suggest that there could be more to come as forward growth powers ongoing total investor returns.
Over the past four years, this soaring dividend and momentum stock has crushed returns from any FTSE 100 tracking fund. The share price is 86% higher and the dividend has increased by 176%. I find today’s figures to be reassuring. Profit before tax shot up almost 92% compared to the previous trading year, from trading profit and property valuation. Net rental income increased 21%, which delivered a 20% uplift in adjusted operating profit after interest payments.
More than just your average REIT
The like-for-like rent roll increased 8.6% and an underlying 5% increase in property values pushed up the firm’s net asset value per share by 8.8%. In a measure of how good these figures are, and of how optimistic the directors feel about the outlook, they pushed up the full-year dividend a mighty 30%.
I reckon Workspace Group is more than just your average passive property-owning REIT. In the words of chief executive Jamie Hopkins, the company aims to be “the go-to home for new and growing companies across London,” and works hard to stay tuned in to the dynamic business vibe in the Capital in order to keep ahead of its customers’ needs. As such, there’s always a lot of refurbishment and redevelopment going on in the business. Developments often include enhancement facilities such as dry cycle stores, showers, cafés and gyms as well as top-notch communications and data facilities.
In a separate announcement, the company today revealed a proposed placing of up to 16,320,062 new ordinary shares, representing approximately 9.96% of the current issued share capital of the company. The proceeds will finance capital expenditure for the firm’s ongoing project pipeline aimed at enhancing rental income and value. On top of that, some of the money will go towards acquiring new property in London “where the Company believes there is an opportunity to apply the Workspace model to drive rental growth and value uplift.”
A clear growth agenda
The acquisition programme is vibrant and I think this growth strategy is likely to drive further total returns for investors in the years to come. Three major acquisitions during the year cost the company £382m and a fourth completed after the year-end date in April costing a further £77m. This expenditure was partly offset by disposals that netted Workspace £125m.
However, despite using up all the firm’s firepower, the directors must be seeing tempting opportunities in the market, hence the fund-raising proposal. To put things in perspective, Workspace’s last placing was in 2014 and raised around £94m. The directors assure us that it was worth it, explaining that since then the company has delivered “significant” increases in property value and trading profit. I think we’ll see much more of that in the years to come and reckon Workspace Group is well worth your research time now.
